It was said that:"Good risk management requires good ethics; and good ethics require good risk management." Do you know the reason that good risk management and good ethics should work together? The report will begin with the definitions of these two fields. Firstly, Risk management is a process to make decisions which plan to minimize the business losses on an organization, and reduce the number or size of these losses. For ethics, it seems like a standard aiming to comply with certain rules or to achieve certain results in particular types of situations. Obviously, the relationship of them seems like two sides in one coin. Because an organization wants to manage its risks well, everyone who represents that organization must practice good ethics.
With China planning to open up gradually the banking sector and the constant introduction of new businesses, commercial banks are facing more pressure on the risk management. Operational risk is the inherent risk of commercial banks, and it cannot be avoided completely. However it was investigated that the operational risk was resulting from the credit risk mostly, and it referred to the Ethics in the risk management. There are same like the line graph as following:
So Ethics plays an important role in risk management field we can see the graph above, which is the basis of the link between operational risk and credit risk.
2. Some events related with them
There were some cases showing the effect of credit risk due to operational risk, and many banks suffered huge losses. Even worse, some banks went bankrupt because of this. In other countries, for example, Bankers Trust had been investigated by the Procter & Gamble in 1994 for misleading and cheating in derivatives trading, which ...
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...mulate the corresponding calibration method according to the characteristics of China. In addition, we can build up application program for risk regulatory on banks’ credit, and help financial institutions (and even individuals) to make reasonable decision. Therefore, they could effectively do decision-making and risk management. We should concern on the ethics and do some researches as following:
(1) How to help the commercial banks in China to understand their risk management better;
(2) How to build up a risk management framework to banks in China;
(3) How to set up some warning levels on critical risk.
These will be situations where neither the good or bad ethics nor the good or bad risk management are so black and white, and where together we can reason through how best to let good ethics and good risk management work together for the ultimate benefit of all.
Ethics is an important proponent when considering any decision. Knowing the difference between right and wrong is something everyone should know. However, the importance of ethics gets minimized when a decision that seems wrong actually has benefits. In the efforts of improving society, often ethics is violated. Sometimes in order for society to be better off as a whole, there has to be little sacrificing of ethical practices along the way to do so.
Ethics are the principles and values used by an individual to govern his or her actions and decisions and it is very important in an organization. The code of ethics within an organization must be developed to help guide the organization in its decisions, programs, and policies. Having an ethical organizational culture that consists of leaders and employees adhering to ethical standards can guide leaders in determining organizational procedures and outline acceptable behavior among staff. Ethical leaders can also help employees meet standards of good quality work, accomplish organizational goals, adhere to policies and rules within the organization, and enhances the organization reputation within the community.
Importance of ethics in the business world is superlative and global. New trends and issues arise on a daily basis which may create an important burden to organizations and end consumers. Nowadays, the need for proper ethical behavior within
At times in a person’s life, they might come across a few situations that leave them with a major decision between two or more options that challenge what they believe or what they might think is wrong or right. These are known as ethical dilemmas. Be it seeing a friend steal something and choosing between being honest and speaking up or letting it go. It can also be getting paid more than you earned and deciding if you’re going to be greedy and keep the money or return it. We run into these situations in our lives, some bigger and more influential on our destiny’s while others are small with no real consequences.
Obviously, financial establishments can endure breathtaking misfortunes notwithstanding when their risk management is top notch. They are, all things considered, in the matter of going out on a limb. At the point when risk management fails, be that as it may, it is in one of the many fundamental ways, almost every one of them exemplified in the present emergency. In some cases, the issue lies with the information or measures that risk directors depend on. At times it identifies with how they recognize and impart the risks an organization is presented to. Financial risk management is difficult to get right in the best of times.
Making good ethical decisions requires a trained sensitivity to ethical issues and a practiced method for exploring the ethical aspects of a decision and weighing the considerations that should impact our choice of a course of action. Having a method for ethical decision making is absolutely essential. When practiced regularly, the method becomes so familiar that we work through it automatically without consulting the specific steps.
What is dilemma? Dilemma means when one has to select a choice in a difficult situation. Now what is ethics? Ethic means selection between rights things and wrong things and knowingly chooses the right side of the situation. In today’s society we are facing ethical dilemma on regular basis which force us to use our judgment relevant to the problems. According to the philosopher 's point of view our moral values helps to choose the right path and teach us to behave in the society. Similar concept applies in business too, we have to select between right and wrong thing and be on the right side. Ethical direction is really important when crisis occurs at workplace. During this kind of crisis workers and leaders has to stay strong in order to get through the situation. However there is the possibility that some times business owner or manager ends up taking wrong decisions which effects on themselves, their workers and the business itself. Now the real question is do business professionals follows the ethical guidelines or they just
As I think about ethics, I think about the events over that last 10 -20 years. It is my belief that companies has gotten away from their Authentic to have a greater bottom line. In light of all the scandals, from Enron to WorldCom to the Bernie Madoff Scandal, firms are beginning to focus more on social responsibility, ethics and corporate culture. Now more than ever organizations are more prone to implement or incorporate ethics as part of their new hire training part of the hiring process. In my opinion being responsible and accountable for you actions are very imperative in today’s business world.
“The term ‘ethics’ can commonly refer to the rules and principles that define right and wrong conduct of individuals” (Robbins, Bergman, Stagg and Coulter, 2003, p.150). Ethical Behavior is accepted as “right” or “good” in the context of a governing moral code. Virtually all societies have developed rules and regulations about how business should be transacted and how business organizations should be managed. In concept, business ethics is the applied ethics discipline that addresses the moral features of commercial activity. In other words, it is a moral code that people conducting any sort of business should feel honorably obligated to follow. People are definitely morally responsible to follow a code of ethics and should never cheat each other. Parts of this code of ethics should be honesty, integrity, fidelity, charity, responsibility, and self-discipline. Those ethics should apply
As has been discussed before, risk identification plays an important part in the risk such as unique, subjective, complex and uncertainly. There are no two identical leaves in the world; similar, there are no two exactly the same risk either. Hence the best risk manger could not identify risk completely. Besides, risk identification assessment is done by risk analysts. As the different level of risk management knowledge, practical experience and other aspects between individuals, the result of risk identification may be difference. Furthermore, the process of identifying risk is still risky. Once risks have been identified, corporations have to take actions on limiting risky actions to reduce the frequency and severity of risky. They have to think about any lost profit from limiting distribution of risky action. So reducing risk identification risk is one of assessments in the risk
Ethics are the driving force behind good business. Every ethical choice made by a professional can and will have a much different outcome than any unethical choice. Bad ethics can ruin many aspects of a business and as (Gaye-Anderson, 2007) states how quite easily the lives and professional reputation of the employees can even be severally damaged (para. 3). Everything from morale to motivation can be severely affected by poor ethical choices. Customers will take their business elsewhere. Employees will abandon ship. Other, competing businesses reap the benefits of the bad moral choices. Ultimately, the entire business can be brought down by one poor ethical choice.
Shleifer, A., & Vishny, R. W. (2009). Unstable banking. Journal of Financial Economics, 97, 306-318.
Ethical behaviour is what all career people should aim to have. Not just the ethical attribute but exceptional behaviour with this regard.this is because in order to build a career, one must be governed by the rules of ethics to safeguard oneself and others. Ethics are essential in the workplace because a tough ethical code provides a non-threatening environment with high employee morale. The corporate social responsibility is important to everyone,therefore it should not be neglected by the employees and the organization. Ethics purely center on personal conduct. It involves personal choices that can make or break a person in the workplace or business. The major importance of having good conduct is to maintain a high level of respect not just for people but for the proffession. Most people who begin their working career have aspirations of excelling at their jobs and reaching the pinnacle of their profession while maintaining a sense of values; however employees often become blind with ambition and put aside their sense of ethics in order to obtain financial security and recognition for their efforts. There are many things that one can gain from having good behavioural ethics in the workplace. It will develop a discipline which will propel the work practices to a higher level and will help set a high standard. It will promote teamwork among the workersand will also buil...
Risk management: Managing risk is a central part of corporate strategy for many organisations. Reputation which takes decades to build up can be ruined through corruption, scams, scandals or environmental accidents. These can also draw undesired attention from regulators, government, court, & media. So, ethical culture should be promoted in the organization.
A variety of groups are concerned in bank profitability for various reasons. The bank shareholders would want to know if the value of their investments is high or low. The investors also use current and past performance to predict future price of the banks’ shares traded on the stock exchanged. The management of the bank as trustee of the shareholders is evaluated and compensated on the basis of how well their decisions and planning have contributed to growth in assets and profits of their banks. Employees of bank also are concerned with profits, since their salaries and promotions are frequently tied to the profitability performance of their banks. Depositors use bank performance and profitability as indicators of security for their deposits in the banks. Finally, business community and general public are concerned about their banks’ performance to the extent that their economic prosperity is linked to the success or failure of their banks.